This story is part of our ongoing investigative series, Hidden Wonder Valley.

Alberta’s bid to attract artificial intelligence data centres could be sabotaged by its own energy policies, says RMI co-founder and world renowned energy analyst Amory Lovins.

“There are strong commercial forces wanting to build more gas-fired power plants so they can sell more gas,” Lovins told The Energy Mix in an interview. But “if you take economics seriously, you have to look at the whole competitive landscape.”

Relying on gas for the power-hungry facilities will be “too little, too late” to compete with places like China, which added 93 gigawatts (GW) of solar power and 26 GW of wind power in May alone, Lovins said. Modern renewables win against fossil generation on cost, speed, and resilience, and there are many examples of renewables running large, heavy industries “very reliably and with superior economics.”

“Anybody who doesn’t realize that and discounts renewables  as a potential way to run Alberta data centres is not paying attention,” Lovins said, producing the risk that “they will kill the data centre industry they’re hoping to create.”

A Strategy Built on Gas

The province announced its AI data centre strategy this past December, aiming to position Alberta as a “destination of choice for AI infrastructure.” From the outset, however, the plan focused heavily on the benefits of data centres for the province’s gas industry.

The data centre plan would create “significantly increased drilling, exploration, and production activity in rural Alberta,” provincial Technology and Innovation Minister Nate Glubish said in a release.

“It’s going to allow for increased distribution investment to get the gas to the different markets that need it, and it’s going to generate significant incremental natural gas royalty revenues for the benefit of all Albertans.”

But some Albertans are not yet convinced of the benefits of AI data centres for their communities, and are pushing back.

An AI data centre proposal northeast of Calgary was recently rejected by Rocky View County local officials, with neighbouring farmers and residents cheering the decision, CBC News reported.

The 1,864- megawatt Greenlight Electricity Centre proposed by Kineticor had already been allocated electricity by the Alberta Electricity System Operator (AESO) for its first phase. But when more than 50 presenters opposed the proposal at a public hearing, with only four speaking in favour, plans for the project’s six data centres, a reservoir, and a gas generation facility were put on hold. Opponents raised concerns about losing prime farmland, and about high water consumption during drought, which farmers experienced first-hand in 2023.

A Levy and a ‘Power Cap’

Developers looking to build in Alberta also faced hurdles from the province. In late August, they were notified of a 2% levy on computer hardware for all facilities seeking to draw 75 megawatts (MW) or more from the grid. Facilities that generate their own electricity—most likely with gas—are exempt.

The levy will eventually be offset by corporate income taxes. Municipalities will still collect property taxes on land and buildings, but the province will assess data centres as “industrial properties” to collect the levy.

Rural Municipalities Association (RMA) President Kara Westerlund said in an email to The Mix they are “seeking clarity from the government on why a decision was made to determine rates for a provincial levy using municipal property assessment methodology.”

“RMA plans to advocate with the government to ensure that municipalities receive a share of benefits from data centre development that reflects their local role in providing infrastructure, land, and managing local impacts of such large-scale developments,” Westerlund said.

Alberta Finance Minister Nate Horner said in a release the levy “ensures data centres pay their share for the infrastructure and services that support them.”

At the same time, with 29 data centre projects requesting more than 16,000 MW of electricity, the province “cannot possibly connect all that,” AESO’s chief executive officer told the Globe and Mail in June. The province has since announced a “power cap” on the amount of electricity the grid operator would allot to data centres. The move follows what one legal expert called “a very interventionist history with all the governments” as the AESO, the Alberta Utilities Commission, and the Market Surveillance Administrator coordinate the province’s deregulated electricity system.

A ‘Challenging Climate for Renewables’

As the province favours data centres that bring their own power, its policy is making investments in renewable generation increasingly difficult. A new industrial carbon pricing framework announced this week will further undermine Alberta’s ability to attract clean energy capital, the Canadian Renewable Energy Association (CanREA) said in a release.

Proposed changes to the Technology Innovation and Emissions Reduction (TIER) program, often referred to as the “industrial carbon tax,” offer companies flexibility by recognizing “onsite emissions reduction investments” as a way to comply with the program. Currently, companies are required to pay into the TIER fund or buy carbon credits. The speed and scale of the expected changes is “surprising and troublesome,” said Radha Rajagopalan, CanREA’s director of policy for Alberta.

“With so many changes already under way in Alberta, in the electricity market and with government policy, these fundamental changes to TIER are adding to an already challenging climate for renewables.”

As much as 39% of the province is restricted from wind or solar energy development by provincial rules that apply only to renewables, a new report by the Alberta Wilderness Association estimates. The restrictions are “heavily focused in the prairie region, where sun and wind resources are particularly concentrated.”

The provincial renewables moratorium and these kinds of policy interventions are causing “a wave of clean energy project cancellations,” says the Pembina Institute. Wind projects are down 64% since October of 2023, solar is down 49%, and storage has decreased by 28%. Meanwhile, the volume of gas projects in the queue has increased by 32%.

“Cancellations of renewables projects are now outpacing new proposals—meaning not only are developers leaving the queue, they’re choosing not to join it in the first place,” Will Noel, a Pembina electricity program senior analyst, said in a release.

Doctors Warn of Health Risks

Continuing reliance on fossil fuels is not only bringing climate change “very close to home, really impacting patients,” but also raising health concerns for communities living near gas turbines, said Dr. Julia Sawatzky, a resident doctor based in Edmonton, and a board member and Alberta regional co-chair for the Canadian Association of Physicians for the Environment (CAPE).

Research shows that nitrogen oxides from gas turbines are released into local communities, causing air pollution that contributes to the development or exacerbation of respiratory diseases.

“We know that nitrogen oxides can contribute to both the development of asthma and chronic obstructive pulmonary disease,” Sawatzky told The Mix in an interview. “That brings people into the emergency room not able to breathe, and there’s also small particulate matter emitted from gas turbines which is similar to what is in wildfire smoke or other really visible heavy air pollution.”

The particulate matter is so small that it can not only go into the lungs, but also cross over into the bloodstream. It can also contribute to high blood pressure through its cardiovascular impact and cause heart attacks and strokes, Sawatzky said.

Gas turbines also emit volatile organic compounds that are known carcinogens that can put people at risk, or higher risk, of various types of cancer, she added.

“It’s actually an environmental justice issue because the projects and the impacts and the harms are being put in places far away from places like Edmonton and Calgary where the decisions tend to be made,” Sawatzky added. “We have to ask ourselves about the experiences and the power of the people, even if it’s a smaller number who are living close to these projects, whether it’s fair for these communities to bear the impacts of resource extraction.”

It brings to mind the concept of “sacrifice zones,” and environmental racism, where in locations across the province, Indigenous communities are bearing the harms disproportionately, Sawatzky said.

‘Locked into Perpetual Fossil Fuels’

Alberta may be getting locked into perpetual fossil fuel generation which will become unsustainable in all respects, Lovins said.

Providing or saving energy should compete fairly at times of crisis, regardless of type, technology, size, location or ownership, he added. “It doesn’t sound like that free market approach appeals to the current government of Alberta.”